To solve the tragedy of child mortality we need to set up an international market in ill health

ABOUT 6 million children under 5 die from infectious diseases each year. Most of those deaths occur in low-income countries as a result of diseases that can be prevented cheaply, such as diarrhoea, malaria or measles.

This tragedy is a result of two fundamental problems in global health: money and support from richer countries are insufficient; and the available funds are often not used efficiently.

Why does this happen? One important cause is that global health is a public good, and like many other public goods it suffers from the tragedy of the commons. The benefits of contributing – reduced risk of new emerging diseases, for example – are shared by free riders as well as contributors. You don't have to pay into the system to reap the rewards.

At present, global health investment is voluntary and few countries make sizeable donations. Since the start of the global financial crisis, investment has stagnated.

Is there a way to improve the situation? We think so. Although the world does not have a lot of experience in managing global commons, there is an example we can learn from: carbon trading.

Battling climate change is also a public good that is vulnerable to free riding. In this case, however, the world has devised a system to try to prevent free riders: carbon credit markets. These are designed to reduce carbon emissions by channelling money to the places where emissions cuts are easiest.

In a typical carbon market, countries have their emissions capped and are issued tradeable permits. Those that want to emit more than their cap have to buy permits from others. The goal is to give countries an incentive to cut their emissions so they can sell surplus credits, meaning that the cheapest and easiest cuts to carbon dioxide emissions are made first.

Likewise, it is much cheaper to save a life in a poor country than it is in a rich country. And so at the National University of Singapore we have designed a prototype cap-and-trade system for global health that similarly gives incentives to high- and middle-income countries to save lives cheaply (PLoS Medicine, vol 10, e1001392).

For such a market to work, we need something to be traded. An obvious candidate is DALYs, or disability-adjusted life years. These are widely used to compare the effectiveness of different health interventions – one person living for a year in perfect health is worth zero DALYs, being dead before their life expectancy is worth one DALY, and being ill for a year somewhere in between.

Disease burden in DALYs is very high in poor countries largely because of high mortality rates in children, who die very early in comparison to the average life expectancy.

In our scheme, donor countries would be required to buy DALYs on a market, by paying for a measles vaccination programme or contributing to malaria control in Africa, for example. Donors would have to buy a set number of DALYs rather than spend a set sum of money, so would have an incentive to buy the cheapest DALYs on the market, which ought to channel donations most efficiently to poorer countries.

How many DALYs would donors need to buy? Various possibilities exist, such as pegging donations to per-capita GDP. We propose linking donations to domestic health expenditure.

Here's how. The World Health Organization judges a health intervention be cost-effective if the money it takes to avert one DALY is less than three years of per-capita income in the country where it is carried out. In Australia, for example, per capita income is US$38,000, so any health intervention that costs US$114,000 or less to gain one DALY is deemed cost-effective.

We propose changing this to a universal cost-effectiveness threshold, set to three times the per-capita income in a typical country on the boundary between low and middle-income, which comes to $3015.

If a high-income country wanted an intervention that was less cost-effective than this – for example, if Australia spent $5 million on a vaccine programme with a cost per DALY averted of about $100,000 – it would have to buy DALY credits from a low-income country to compensate.

How many? If spent in a poor or middle-income country, $5 million should buy about 1650 DALYs. Australia's plan would gain just 50, so it would have to buy 1600 from elsewhere to compensate. One option would be to spend $8050 on measles vaccination in sub-Saharan Africa, which costs a measly $5 per DALY averted. That increases the overall cost of the project by less than 0.2 per cent.

If this system was implemented across the board it would supply the estimated extra $36 billion to $45 billion worth of DALYs required each year to reach the Millennium Development Goals for health – a two-thirds reduction in child mortality, three-quarters reduction of maternal mortality and a reversal of the spread of HIV and malaria.

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